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Boeing's shares rise after tentative labor deal that could avert major strike

Reuters |
Sep 09, 2024 04:38 PM IST

BOEING-LABOR/MARKET (UPDATE 1, PIX):UPDATE 1-Boeing's shares rise after tentative labor deal that could avert major strike

Sept 9 - Boeing's shares rose 5% in premarket trading on Monday after the planemaker reached a tentative deal with a union representing more than 32,000 workers in the U.S. Pacific Northwest that could avoid a possible strike later this week.

Boeing's shares rise after tentative labor deal that could avert major strike
Boeing's shares rise after tentative labor deal that could avert major strike

The proposed four-year contract was hailed by the union as the best it had ever negotiated. It is also an early win for new Boeing CEO Kelly Ortberg, who is tasked with turning around the struggling planemaker.

As part of the agreement, Boeing has committed to building a replacement for its workhorse 737 at its Pacific Northwest facilities, if the project is started during the four-year period of the labor contract, though the planemaker has not yet announced the new jet.

The terms include a general wage increase of 25% over four years, below the 40% wage hike demanded by the International Association of Machinists and Aerospace Workers union, signaling its recognition of Boeing's difficult financial position.

The wage hikes are tiered with the new and senior workers getting the largest share to boost retention, TD Cowen analysts said.

The financial terms of the labor deal seem acceptable to Boeing, J.P.Morgan analyst Seth Seifman said in a note.

However, Seifman noted workers could still vote down the deal. There will be two votes on Thursday - one on the contract, which requires 50% to pass, and the second on whether to strike, which requires two-thirds approval.

"Workers have leverage and a highly unscientific sample of views on social media suggests dissatisfaction with the contract terms among some union members," Seifman added.

Jefferies analyst Sheila Kahyaoglu estimated a roughly $900 million hit to cash from the proposed wage increases.

The early agreement is a boost for Boeing as it tries to restore investor and customer faith, navigate regulatory scrutiny and ramp up production of its 737 MAX after a door plug on a near-new MAX blew off a jetliner while in mid-air in early January.

Since that incident, Boeing's stock price has cratered 37%, compared to a 7.7% rise in the blue-chip Dow index.

This article was generated from an automated news agency feed without modifications to text.

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